Residz Team 3 min read
What a difference a year makes! In September 2022 there was a record number of houses under construction across Australia. In September 2023, that enthusiasm seems to be tailing off.
The Master Builders Association’s latest forecast shows new home building activity is currently declining. In a forecast update it recently announced that estimated work began on just 173,755 new homes during 2022-23, a 16.5 per cent decline on the previous year.
“Canary in the goldmine”
MBA CEO Denita Wawn says the building and construction industry is “the canary in the economic coal mine” and activity will be very dependent on the macroeconomic environment.
“Australia’s economy is navigating a challenging period. There is no denying millions of Australians and business owners are feeling the mounting pressure of rising costs of living.”
Under 200k home starts over next year
MBA’s updated forecasts apply to the building and construction industry out to 2027-28.
“2023-24 will see home starts decline by another 2.1 per cent to around 170,100, well below the 200,000 needed per year to meet population growth,” says Denita Wawn.
“However, this will likely be a bottoming out point as supply bottlenecks loosen and we return to a more desirable investment market on the demand side.
“We forecast new home starts will peak to just over 241,000 in 2026-27.”
New home starts may just meet targets
Ms Wawn says that, in good news , the projected volume of new starts over the five-year period up to 2027-28 exceeds the one million home target under the Housing Accord (but only just).
“There is still a lot of work that needs to be done to achieve the revised target of 1.2 million homes as announced by National Cabinet last month,” she says.
Hurdles for new home builders
Ms Wawn says the cost of building homes has been exacerbated over recent years with unnecessary delays and barriers encountered on their journey to completion. This includes planning impediments, lengthy approval processes and high developer charges on new land developments.
She said the MBA acknowledged the efforts of the Government to bring the states and territories together to tackle the housing crisis, adding that more people were needed in the industry, and without the red tape.
“The economic success of our nation hinges on a strong building and construction industry.
“We know every $1 million worth of residential building activity supports around $3 million in activity across the economy. This multiplier effect is vital to keep our economy away from the risks of falling into a recession,” Ms Wawn said.
Infrastructure projects boost non-residential building sector
On the outlook for the non-residential sectors, Ms Wawn added: “As the industry moves through the worst of the supply chain bottlenecks, 2023-24 is likely to be quite favourable for the non-residential and civil sectors thanks to work on transport and social infrastructure investment.”
“We forecast activity to peak at $124.33 billion during 2024-25 with resource and major transport infrastructure projects doing much of the lifting to get us there before activity sinks back quite heavily, falling to $106.42 billion in 2027-28,” Ms Wawn said.
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